Inside the mind and heart of Venkatesh Sridhar

There has been so much noise being made about the introduction of 3G into India, right from the battle for spectrum amongst the CDMA and GSM providers and then it changed to that of a battle between Ratan Tata and others. Ratan Tata was willing to pay upto Rs. 1,500 crores for the additional spectrum required to commence 3G services. So, I decided to pen down what 3g stands for, my views on what the operators can do with it (that’s the second article)

What is 3G?

3G stands for Third Generation of Mobile communications. The services associated with 3G provide the ability to transfer simultaneously both voice data (a telephone call) and non-voice data (such as downloading information, exchanging email, and instant messaging). In marketing 3G services, video telephony has often been used as the killer application for 3G.

What does spectrum have to do with 3G services etc?

Since mobiles rely on the radio frequency for the communication, a spectrum is necessary for usage of mobiles and that is the reason why licenses where required in the first place to start a mobile service and it is the same case in India. You will now ask, why do they need additional spectrum when they already have spectrum to provide services since our mobile operators are providing services. This is primarily because majority of networks in India is either 2G or 2.5G. 2.5G is a stepping stone between 2G and 3G cellular wireless technologies. The term “second and a half generation” is used to describe 2G-systems that have implemented a packet switched domain in addition to the circuit switched domain. It does not necessarily provide faster services because bundling of timeslots is used for circuit switched data services (HSCSD) as well.

While the terms “2G” and “3G” are officially defined, “2.5G” is not. It was invented for marketing purposes only.

2.5G provides some of the benefits of 3G (e.g. it is packet-switched) and can use some of the existing 2G infrastructure in GSM and CDMA networks. GPRS is a 2.5G technology used by GSM operators. Some protocols, such as EDGE for GSM and CDMA2000 1x-RTT for CDMA, can qualify as “3G” services (because they have a data rate of above 144 kbit/s), but are considered by most to be 2.5G services (or 2.75G which sounds even more sophisticated) because they are several times slower than “true” 3G services.

Now that I know why is there a need for spectrum for providing 3G services, why is it causing so much hype in the press and the industry?

This is because the mobile phone industry truly believes that it cannot sustain its traditional voice business, as in India people are using the ‘missed calls’ as a way of communicating. How many times, have you said to your friend, “missed call de jab tu nikle”. In India, the cellular operators earn more when you send a sms to your friend, to your favorite participant in a tv show, download a ringtone, etc. All these have been termed VAS or Value Added Services. If you closely analyse the ARPU (pronounced as aarpoo) or Average Revenue Per User, you would see that VAS is what contributes towards the revenues, this does not mean that no one uses the phone, people do use their phones but the operators do not get increased revenue due to the falling call rates. Whereas, if you have noticed the trend in VAS is towards increasing the cost of using VAS services. I remember till 2002-03, a sms all over the world sent from any operator in India cost just Rs. 1. Today, it varies from 1 for local, 2 for national and 5 for international. Though, the corporate customers and postpaid customers pay slightly less.

Have you noticed the trend is moving towards providing additional values, now if you have a GPRS enabled handset then you can pay Rs. 50 and download a game from your operator. These are all examples of revenues generated by VAS provided by the operators. This is the reason why they feel that 3G is needed for them to sustain their business in the long run and the downward pressure on the call rates is expected to remain for some more time, India is still a very price sensitive market, noticed the explosion of mobile customers once incoming calls became free?

I understand why the operators want 3G, but you have not told me why the press loves the idea so much?

Well, like they say, any marketing is good marketing for products and that’s what you will observe in the 3G market. If you see, the promise of being able to watch live tv on your mobile phones, video streaming onto your phones, etc. is too good to be true, but it is not that it cannot happen, its happening in Japan and South Korea, 2 countries which have national rollout of 3G services on a mass scale. This is the reason why the media believes 3G is a wonderful technology and since the industry is making a lot of noise about it, the press is covering it like it is supposed to do. This is the main reason why it has received such widespread courage in the media.

This is the first part of my article about 3G. I will follow it up with an article soon again.